HEM Development - Sluggish & Confusing?

The average household has yet to realize the potential of HEM systems.
Published: Wed 17 Apr 2013

A new study from Pike Research confirms that progress of Home Energy Management (HEM) and connected home industry continues to be sluggish. By now, with major deployments of smart grid infrastructure in place, there is an expectation that a smarter grid would enable the wider use of new tools and incentives for consumers to use energy more efficiently. It was hoped that money would be saved and that utilities would benefit from lower overall consumption and therefore not have to spend capital so quickly on new power generating plants. But, the research shows that people are still in the dark about what drives energy consumption in their homes.

Even with the following market drivers in place, research shows that HEM has a long way to go:

  • A desire by consumers to reduce their monthly energy bills
  • New-home construction and home remodeling activity that present opportune moments to install the necessary hardware
  • Increasing competition among BSPs that demonstrates some market validation
  • Smart grid programs

This trend will need to change. With energy consumption escalating across the globe (thanks to the constant development of technology and an ever-growing population), the need for energy conservation will become increasingly urgent. Continued severe weather such as storms and droughts will also force consumers and utilities to manage their consumption more effectively. In addition to this, the wider use of variable pricing schemes, a “greener” mindset, the encouragement of regulatory mandates for improved efficiency and the consumer’s need to reduce his power bill, will help drive the adoption of HEM forward.

 A number of service providers such as ADT, Comcast, Verizon, Vivint, Alarm.com and others already offer limited home control capabilities along with security and other features, including some energy management of wireless, connected thermostats. Verizon even offers some energy monitoring. Comcast has partnered with EcoFactor for automated, “set-it-and-forget-it” thermostat functionality. According to research, most US consumers (63%) say they are interested in HEM but most are not aware that BSP’s currently offer HEM services. For HEM to work, customers must understand the benefits of saving energy in the home. Customers are unaware of what the biggest energy users are in their homes and they have no idea what to do about them. One recent study found that bills would have to go up at least US$10 per month before a homeowner is willing to pay for energy-efficiency retrofits. It is clear that service providers, utilities and others getting into this space need to do a better job of educating consumers on this. Utilities should offer more energy portals and reports that educate the average consumer.

Lack of awareness is not the only obstacle standing in the way of HEM development. The following factors also hinder growth:

  • Significant initial costs for HEM hardware plus recurring monthly fees
  • Crowded vendor space
  • Contracts that require multi-year commitments
  • An uncertain return on investment
  • Relatively stable energy costs
  • The lack of technology standards for interoperability
  • Lukewarm utility support
  • Apathetic consumers who pay relatively low prices for electricity
  • Mistrust in utilities’ advice on how to conserve energy
  • An ever-increasing onslaught of gadgets that offset the progress made in efficiency standards
  • Many utilities believe that it will be far easier to convince commercial property owners to adopt energy efficient behavior and purchase technology than residential
  • Indifference to the promised potential savings
  • Utilities face a confusing array of technologies and options (some are not even ready to meet expectations)
  • Communications standards are in the development phase 

Despite these hindrances, Pike forecasts that a combination of drivers will grow global revenue from all home energy management segments to more than US$2bn by 2020, compared to a 2011 base of US$93m. A huge opportunity exists for providers such as electronics installers, electricians, HVAC specialists and energy-efficiency professionals to sell communicating thermostats, energy monitoring equipment, home networking and lighting controls. In addition, they should provide a more personalized service than the large, broadband service providers. However, companies that sell home energy management consoles may be at risk as the homeowner prefers to see energy data on their smart phones, computers or TVs-they don’t want another new single-purpose device cluttering their homes.

As there are so many choices in technology for HEM, utilities can get confused. They need clear choices and tangible approaches to enable home energy management. Therefore, it makes sense that utility professionals, especially energy management and IT folks, team up in order to select the right HEM technology and business model.

Engerati Analysis

It is essential that utilities increase the need and awareness of HEM as this will help to improve overall grid and energy efficiency.

Sources

GreenTech Advocates-HEMs Market Has Potential, But Remains Largely Untapped

GreenTech Grid-Home Energy Management:2012 Status Report

Smart Grid News-Home energy management: For now, utilities are on their own

Smart Grid News-Home energy management continues to hit roadblocks, study confirms